New Zealand Business Confidence Surges to 14-Year High

Oct. 8 (Bloomberg) -- New Zealand business confidence
surged to a 14-year high in the third quarter, signaling the
economy is rebounding from a mid-year slowdown.

A gauge of confidence based on a survey of about 900
businesses by the New Zealand Institute of Economic Research
rose to 38 from 32 three months earlier, the most since the
first quarter of 1999. The seasonally adjusted measure increased
to 32 from 30, the highest since the first quarter of 2010,
NZIER said in Wellington today.

“Businesses are optimistic, activity is rebounding and
this is being gradually realized into more jobs and profits,”
NZIER principal economist Shamubeel Eaqub said. The rebound in
domestic trading activity is consistent with annual economic
growth of about 3 percent, he said.

The New Zealand dollar rose after the report before easing
to trade little changed at 83.06 U.S. cents at 10:56 a.m. in
Wellington.

Economic growth slowed to 0.2 percent in the second quarter
from 0.4 percent three months earlier as a drought curbed farm
output. The Reserve Bank has said it is likely to start raising
interest rates next year as the annual pace of growth picks up
to 3.5 percent, the fastest since 2007, led by consumer
spending, house construction and rebuilding in earthquake-damaged Christchurch.

Christchurch Rebuild

“Growth has been very concentrated in Canterbury,” Eaqub
said. “Now we’re starting to see it broadening out across other
regions, which is very positive.”

A net 8 percent of firms said trading activity improved in
the third quarter, and 30 percent expect further gains in the
current quarter, today’s report showed.

A net 12 percent of firms expect profits to increase this
quarter after a net 8 percent reported a decline in the third
quarter.

The survey showed firms expect the central bank to raise
rates from a record-low 2.5 percent over the course of next year
despite subdued inflation and the imposition of lending
restrictions on Oct. 1 to curb a housing boom, Eaqub said.

The confidence survey signals “a solid pace of annual
growth momentum over 2013,” Mark Smith, senior economist at ANZ
Bank in Wellington, said in a research note. “Increasing
pressures on capacity are likely to prompt rate hikes, but this
continues to be a 2014 story.”

New Zealand’s budget deficit is narrowing faster than
forecast, and Finance Minister Bill English said yesterday the
government remains on track to return to surplus in the year to
June 2015.